Feb 23, 2013

Philippines - Philippines takes new aim at China

MANILA - After a year of failed multilateralism and bilateral brinkmanship, the
Philippines has abandoned hope of pressing China into a compromise on
territorial disputes in the South China Sea.

While Manila's recent decision to
submit its case for United Nations mediation ups the diplomatic ante, Beijing's
out-of-hand rejection of the move indicates tensions could rise before they
wane. [1]

After a year of diplomatic deadlock at the Association of Southeast Asian
Nations (ASEAN) under the chairmanship of Cambodia, one of China's staunchest
regional allies, few expect a swift and decisive multilateral resolution under
Brunei's more neutral leadership in 2013 considering the significant divisions
that have opened inside the 10-member grouping.

Based on the proceedings and outcomes of regional summits and gatherings held
last year, Manila has come to realize the extent to which China is willing to
use its multiple levers of influence to thwart any efforts at forging a unified
regional response to the maritime disputes. Beijing has consistently insisted
that the disputes should be settled exclusively through bilateral mechanisms.

At the same time, the economic stakes driving the disputes are rising. The US
Energy Information Administration's (EIA) recently estimated that the South
China Sea could hold as much as 11 billion barrels of oil and 190 trillion
cubic feet of natural gas in proven and probable reserves. The EIA also
projected significant undiscovered hydrocarbon deposits in the Spratly islands,
specifically around the contested Reed Bank. [2]

If true, huge untapped oil and gas deposits within the Philippines' Exclusive
Economic Zone (EEZ) would represent an economic boon. The Philippine economy is
currently only 60% energy self-sufficient, with the 40% shortfall covered by
oil and coal imports from neighboring and Middle Eastern countries. [3]

Yet China's rising assertiveness and increasing willingness to challenge Japan
and the United States - both Philippine strategic allies - indicates to some
analysts that China has designs on securing that potential energy bonanza for
its own economic and energy security. Chinese and Philippine vessels skirmished
around Reed Bank in March 2011, signaling Beijing's willingness to use limited
coercion in disputes where energy resources are at stake.

China's showdown with Japan over the Senkaku/Diaoyu islands in the East China
Sea and its People's Liberation Army's (PLA) alleged role in recent cyber-attacks
against US targets [4] has by association stirred anxieties in the Philippines.
Manila maintains strategic partnerships with both Tokyo and Washington, ties
that President Benigno Aquino is bidding to deepen to close its yawning defense
gap with China.

Aquino's government has recently prodded the two powers to provide an extensive
package of military aid, training and advanced hardware. The Philippines has
effectively joined in a budding regional arms race through its pursuit, both
through direct purchase and foreign military aid, of fighter jets, anti-ship
missiles, patrol boats and naval helicopters to bolster its South China Sea
claims.

Still, the Philippines has no intention of going head-to-head with its giant
neighbor any time soon. Instead, Manila's has adopted a two-pronged strategy
that aims to deter further Chinese aggression by internationalizing the
disputes through the United Nations while strengthening its defensive
capabilities through deepened ties with powerful allies.

High stakes

While the Philippines has not
been prone to the nationalistic outbursts seen in some neighboring countries,
including China, Japan and Vietnam, Aquino's administration increasingly views
its territorial disputes through a lens of national pride, geostrategic
interest and domestic calculation. After decades of negligence and strategic
hibernation, Manila has awoken to the depth of its national interests in the
South China Sea.

This recognition comes amid a discernable national mood swing. The Philippines
is now among the world's 10 fastest growing economies, with gross domestic
product expected to grow by over 6% this year. Decades of political paralysis
and endemic corruption have simultaneously galvanized civil society and youth
groups, with many energized by Aquino's promise of political change.

Faced with those fast rising popular expectations, Aquino's government has
astutely tapped into this grass roots dynamic. At the same time, a rising sense
of national pride has put an even higher political and economic premium on
securing the potential wealth of energy resources in the contested territories
the Philippines claims in the South China Sea.

According to the most recent EIA report:

"The majority of current
reserves exist in shallow water basins on the boundaries of the sea … however,
the Spratly Island territory may contain significant deposits of undiscovered
hydrocarbons…The US Geological Survey estimates anywhere between 0.8 and 5.4
(mean 2.5) billion barrels of oil and between 7.6 and 55.1 (mean 25.5) trillion
cubic feet of natural gas in undiscovered resources. Evidence suggests that
most of these resources are likely located in the contested Reed Bank at the
northeast end of the Spratlys, which is claimed by China, Taiwan and
Vietnam." [5]

The Philippines has sought to
explore and develop hydrocarbon resources around the Reed Bank since first
discovering natural gas there in 1976. The US-based Sterling Energy and
UK-based Forum Energy won exploration concessions for the area from Manila in
2002 and 2005 respectively. [6] However, the Gloria Macapagal-Arroyo
administration bowed to Chinese pressure and suspended exploration concessions
granted to foreign interests in the area. She opted instead for joint
exploration with Beijing and Hanoi under the 2006 Joint Marine Seismic
Undertaking (JMSU) in the disputed area.

By standing up to China in defense of sovereign claims, the Aquino government
aims not only to boost its domestic popularity but also avoid criticism from
millions of politically active and increasingly nationalistic netizens. His government's
policy stands in stark contrast with the Arroyo administration, which was
widely viewed as subservient to China and tainted by corruption-ridden
bilateral business deals.

Carrots and sticks

The Aquino administration has
implemented a sometimes contradictory strategy by encouraging both a
revitalized US military presence in the region while also attempting to appease
China through diplomatic overtures. The strategy has been predicated on the
assumption that a delicate combination of deterrence and diplomacy will
neutralize Beijing's expansive territorial claims.

Manila also failed to anticipate China's anxiety about growing military
cooperation between the US and regional allies and strategic partners such as
the Philippines. That cooperation and occasional tough talk from Washington on
freedom of navigation issues in the South China Sea has indirectly emboldened
the Philippines and Vietnam to push their claims vis-a-vis China.

Just days after former US secretary of state Hillary Clinton expressed her
country's opposition to any "unilateral actions that would seek to
undermine Japanese administration" of the Senkaku/Diaoyu islands, the
Philippines took its South China Sea claims against China to UN arbitration. In
the previous month, Vietnam's new Law of the Sea took effect, which, among
other things, emphasized the primacy of international law in deciding
territorial disputes.

The Philippines is well aware that China will refuse to submit its claim of
"indisputable sovereignty" to any international arbitration panel.
Indeed, there is no guarantee that international arbitration under the United
Nations Convention on the Law of the Sea (UNCLOS) will result in a decisive
resolution of the disputes.

In this sense, the Philippine decision to internationalize the dispute should
be viewed as a move to exert further pressure on Beijing by emphasizing to the
international community the perceived unilateral and provocative character of
China's territorial claims. That includes China's controversial "nine-dash
line" map, which covers practically all features in the disputed waters.

In addition to a number of European parliamentarians, [7] top US officials such
as the newly-installed Secretary of State John Kerry [8] have already expressed
their support for the Philippines' decision to resolve the disputes through
international law.

The other stick in Manila's new strategy is a military build-up. In 2012,
Aquino sought an additional US$1.8 billion in defense spending, primarily to
refurbish the country's armed forces through the acquisition of ten attack
helicopters, two naval helicopters, two light aircraft, one frigate and air
force protection equipment. [9] His government also extended the 1995 Armed
Forces of the Philippines Modernization Act, which promises 15 additional years
of sustained investment in the country's defense capabilities. [10]

In that direction, the Philippines is set to acquire 12 FA-50 fighter jets from
Korea [11], three AW109 Power light twin helicopters [12], two anti-submarine
choppers, [13] the US's high endurance cutter USCGC Dallas [14],
and possibly Harpoon anti-ship missile systems for its flagship BRP Del Pilar
and BRP Alcaraz vessels. [15]

Japan and the US have also backed the Philippines' bid to develop a
"minimum deterrence" capability vis-a-vis China. Japanese Prime
Minister Shinzo Abe is now finalizing his country's first major military aid
package in recent history, with the Philippines set to be its biggest
beneficiary. The Philippine Coast Guard is set to acquire from Japan next year
10 new 40-meter multi-role response vessels through a soft loan grant. [16]

In addition to tripling its military aid to the Philippines in 2012, the US has
stepped up its military presence in the country through more rotational visits
of its warships, nuclear submarines and military personnel - a trend that is
expected to rise in the coming years in light of the US's announced
"pivot" towards Asia. [17]

As Brunei assumes the chairmanship of ASEAN, the Philippines' strategy is to
use new sticks to convince China to take the carrot of a multilateral
dispute-settlement mechanism, specifically the adoption of a legally-binding
code of conduct for the South China Sea.

Judging by China's defiant reaction to the Philippines' petition for UN
arbitration in their disputes, there is a risk instead that Beijing views
Manila's new two-way strategy as more stick than carrot and responds with
reciprocal hard measures.

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